The main aim of a life insurance cover is to secure the needs of dependents after one’s untimely death. In addition to the emotional suffering, the financial insecurity arising out of losing the primary earner can be immense. This is the reason why most personal finance experts suggest that life insurance should be the main part of one’s investment planning. In India, life insurance is yet to reach its full potential as the awareness about life insurance products is pretty low. While the Indian life insurance industry has witnessed a lot of transformation ever since the entry of private players, it still has a long way to go in terms of protecting the entire population of our country.
Life insurance is basically a contract between two parties — an insurance company and an individual — wherein the company guarantees the payment of compensation to the insured’s dependents in case of his/her untimely death within the predetermined policy term. There are different types of life insurance products available in the market. All life insurance covers pay a lump sum death benefit following the unexpected death of the policyholder within the policy term. Savings/investment-oriented life insurance policies may also accumulate additional bonuses during the course of the policy term.
The Indian life insurance industry witnessed a major transformation in the year 2000 due to the entry of various private players. As of now, there are 24 companies competing with each other in the life insurance industry. This intense competition has created an opportunity by providing a lot of choices for customers. Though there are a lot of takers for life insurance in India, the country’s overall insurance penetration is just 2.72% according to the Economic Survey 2018. The potential to grow is extremely high in the Indian life insurance market. This is the main reason why the industry continues to attract new entrants. Most importantly, this change has led to the adoption of various regulatory changes and consumer-centric practices in the life insurance industry.
Life insurance policies can be broadly classified into traditional life insurance policies and non-traditional life insurance policies. Except for ULIPs, most of the following types of life covers come under traditional policies:
Most of the nuclear families in India have only one primary earner. The unexpected loss of the primary earner can have devastating consequences on a family’s financial security. Undergoing a major financial crunch along with the emotional burden can result in major trauma for the family. Life insurance aims to avoid this situation by protecting the life of the insured person against unexpected eventualities. The family of the insured person can manage their future expenses with the lump sum payment received from the company. Hence, life insurance can safeguard a family from a critical situation associated with the loss of a primary earner.
Death and maturity benefits are the most obvious benefits of life insurance covers. However, there are many other benefits offered by life insurance policies apart from these two. The overall benefits offered by life insurance covers are listed as follows:
Considering the time of uncertainty we live in today, it is always better to safeguard the lives of your loved ones with a life insurance policy. Life insurance can be purchased by anyone irrespective of their income. Low-income individuals can opt for a lower sum assured amount that fits within their budget. A well-planned life insurance policy might come in handy during turbulent times when a family is facing uncertainty following the loss of the primary earner.
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